Beginning A Fintech Ecosystem From Scratch In Saudi Arabia

There's a common misconception that ideas, businesses, and whole sectors somehow appear out of nowhere, propelled by some invisible force. Cities like London, New York, and Tel Aviv have emerged as global epicenters in the development of cutting-edge financial technology during the last decade. Governments have helped fuel this expansion by providing friendlier Fintech regulations Saudi Arabia climate, easing networking barriers, and implementing other actions designed to foster the development of FinTech centers in their respective countries.

Even with this kind of backing, it is very difficult to establish a functioning FinTech ecosystem with a small number of FinTechs and no obvious channels for regulating the industry or gaining access to the best and brightest individuals in the field. Saudi Arabia has set lofty targets for addressing this issue as part of its Vision 2030 project.

I spent most of 2018 in Saudi Arabia, where I work as part of an executive innovation group specializing in financial technology, laying the groundwork for a new FinTech center in the Middle East. The direction that Saudi Arabia has taken in developing its FinTech capabilities is largely a product of the insights I gained on my travels.

So, what are the first steps they have taken to build a FinTech industry from scratch?

Having a thriving enterprise requires a thriving ecology to foster its development. The Saudi government, together with local universities, corporations, banks, VC firms, and FinTech businesses, sought to construct this by forming a network to foster innovation, investment, and infrastructure development. FinTech Saudi is a brand-new organization in charge of this system.

Regulation

Greater than four thousand financial technology businesses have been established in London. There are just 15 of them in the whole of Saudi Arabia. Why?

When FinTech companies in Saudi Arabia reach a certain point of growth, they often find it necessary to move their operations abroad. It's been mostly caused by the absence of necessary infrastructure and oversight. Since the Saudi Arabian FinTech sector is still in its infancy, much effort has been put into fostering an environment that will not only attract new businesses but also keep those that have already established themselves there.

Key to fostering long-term, thriving, and scalable Fintech laws Saudi Arabia ecosystem was the establishment of a regulatory framework, including two sandboxes with the Saudi Arabian Monetary Authority (SAMA) and the Capital Markets Authority (CMA) based on the UK Financial Conduct Authority's (FCA) sandbox launched in 2016.

Education

It takes an enterprising individual or team to come up with the primary concept behind a new financial technology company. Frustration with an existing system or product, along with the skills and knowledge necessary to develop a superior replacement, is usually the seed from which this kind of concept germinates.

Due to the absence of a mature FinTech industry, Saudi Arabia has struggled to learn from the experiences of other countries and develop innovative ideas into viable businesses. And even among individuals who feel impelled to launch their own FinTech company, there is a dearth of technical and commercial expertise to fuel domestic enterprise expansion.

For this reason, educational reform has been a priority in Saudi Arabia as a means of kickstarting the development of the necessary competencies. Initial efforts have focused on catering to college job fairs and providing internships in the form of a FinTech-inspired curriculum. There has been an uptick in the number of FinTech clubs and general co-working spaces set up to enlighten aspiring businesspeople and create a large pool of qualified workers from whom FinTechs may hire.

What does success look like?

For the next five years, Saudi Arabia has set ambitious goals. Community, education, and micro, small, and medium-sized enterprises are the three pillars upon which the strategic vision rests (SMEs).

The government is doing a lot to make the idea a reality by organizing a variety of events and adding a lot of new employment to the industry. There is a focus on educating thousands of pupils around the nation, and those goals will be included in the plans. Initiatives are underway to greatly increase the number of Saudi Arabian FinTech firms, which will result in a large influx of fresh capital for SMEs.

Initially, it is anticipated that the bulk of FinTech start-ups that emerge from this initiative would concentrate on the expanding local market. However, Saudi Arabia may eventually become a wonderful point of entry for foreign FinTechs aiming to scale in the kingdom. FinTech Saudi is certain it can provide the education, regulation, and ecosystem development that the Fintech licenses Saudi Arabia industry needs to thrive.

We have seen the global proliferation of a wide variety of FinTech industries, each with its own unique structure and scale, aided in part by government encouragement and backing. Saudi Arabia, on the other hand, plans to do the opposite: prepare the ground, plant the seed, and encourage its development.